The rewards that come by design

Think D as well as R&D, writes Hugh Aldersley-Williams

British industry spends more on product design and development than on research and development (R&D). Spending on design is more evenly spread throughout industry than R&D spending and has a comparable long- term beneficial effect on turnover.Those are the key findings of a survey of design activity in British industry carried out for the Design Council by the Centre for Economic Forecasting at London Business School.

The results come as the Department of Trade and Industry's annual R&D scoreboard shows Britain bottom of the spending league of large industrialised nations. The world's largest R&D spenders maintained their level of spending over the year to 1996 at 4.4 per cent, while British companies cut back from 2.5 to 2.3 per cent, despite 8 per cent sales growth. There is no similar scoreboard for design spending, so it is not clear whether British industry lags there too. However, with R&D spending generally regarded as a good thing (even if actions do not always follow words), and design still seen as a luxury or a cost by much of industry, the indications are not promising.

Things may be moving in the right direction. Introducing a seminar announcing the research, Alec Daly, deputy director general of the Confederation of British Industry and chairman of the National Manufacturing Council, pointed to CBI trends surveys which show respondents rating design increasingly highly over the past three years. It is cited almost as frequently as price as a factor contributing to market success.

This is believed to be the first time design has been singled out for examination from an economic standpoint. "Economists are interested in what makes economies grow," says Andrew Sentance, the centre's director and co-author of the report. "People focus on R&D, but design, too, is part of that innovation process."

The study found that British industry spends pounds 10bn on design each year (1995 prices), amounting to 2.6 per cent of manufacturing turnover. About 4.5 per cent of the work-force is closely involved in design.

Spending an additional 1 per cent of turnover on product design and development appears to raise turnover and profits by up to 4 per cent over five years, Mr Sentance told industry leaders at the seminar. "Design has a significant impact on growth," he said. "Our estimates suggest that an increase of one-third in in-house design by British manufacturing industry is associated with a rise in the growth rate of manufacturing output by 0.3 per cent a year, and the growth rate across the economy as a whole by 0.1 per cent a year. These estimates are similar to those produced by other researchers for the impact of R&D activity on growth.

"Companies that invest in product design and development tend to be more export oriented which is positively associated with growth. Design-intensive industries have tended to be more rapidly growing over the past 10 years."

The research was clearly flawed in its attempt to isolate design from other areas of business with which it must enjoy a constructive relationship if it is to contribute to competitive advantage. One might quibble with the methodology. Certainly, the designers at the seminar did. Richard Seymour of the consultants Seymour Powell was disappointed that industry respondents seemed happy to break down design into simplistic categories, such as technical or appearance design, rather than view it as an integrated process.

Sentance's survey found, for example, that the motor industry spends about 8 per cent of turnover on bought-in design services but that only 0.6 per cent of that represents appearance design. "You can't tell me that the car industry doesn't rate aesthetics as important, so what were they recording there?" wonders Clive Grinyer, recently appointed director of product design at Fitch and formerly European design manager for Samsung.

Ian Rowland-Hill, chief executive of the Design Business Association, which represents the interests of design companies, also found the survey approach unhelpful. "The successful use of design starts when someone in a client company says `we know we've got a problem, now how are we going to solve it'," he says. "In going through that intellectual enquiry, they are beginning the design process. The craft of design is the end of the process. For a company to develop an effective partnership with its own design department or a design consultant can help at the beginning as well as the end."

The survey also found that in-house design activities have a much more positive impact on growth prospects than bought-in design. That finding too was criticised by Rowland-Hill. "The perception within manufacturing may be that in-house is better value for money and that consultants are expensive - like taxis with the meter running. But the perception is wrong."

Nevertheless, Sentance's main finding - that a small increase in design spending can be rewarded with a three- or four-fold return - presents design managers and designers with an additional weapon for their armoury in fighting for design investment at board level.